Models work—until they break. COVID-19 and its responses break many expectations and forecasts. Assessing how enterprise service providers will fare considering current events is an intensive cross-domain exercise. Data sources include past economic crises, public health and pharma experts, and public sector responses. Effects differ by industry and by country. This is the context to evaluate service provider performance, and the effective responses they formulate for clients.
Nations are threading a needle as they spend to sustain their citizenry through the pandemic. Any one, or all, of currency hyper-inflation, economic depression, political instability, and civil unrest are possible side effects. World leaders should recognize the danger and cooperate to help friendly partner nations. Omdia’s forecasts assume this “conservatively optimistic” scenario where COVID-19 strikes a major blow, but the global economy does not founder.
What does COVID-19’s potential economic impact mean for providers of enterprise services? There are still only small hints. Some large network operators increased their quarterly bad debt allowances (mainly on consumer services) by 33─50%. In absolute terms, the reserve cushion only increased from 3─5% to about 5─8% of receivables. For a business example, a large SME broadband provider launched a program letting enterprises downshift into lower-cost tiers or temporarily suspend their connections. At the end of March, 98.2% of business connections were conducting business as usual. In the IT services space, large SIs by end of March had not needed to increase their provision for doubtful allowances.
So far, so good. But the “conservatively optimistic” scenario may fail. Political, social, and financial instability starting inside national borders can have a regional or global impact. If that happens, enterprise providers still have some advantages. First, ICT infrastructure and services are mandatory to businesses. No matter what the economic conditions, companies need connectivity, processing, and storage. Second, larger service providers are experienced in connecting enterprise sites in difficult markets and under challenging conditions. Connectivity and processing will find ways around trade tensions and stressed supply chains. Providers also find ways to compensate for artificial currency controls and cycles of devaluation. Service providers that have experience operating in difficult markets are resourceful in keeping services up and running, and their workers safe in unsafe or unstable conditions.
In the meantime, we will all hope that countries hold the line on financial, social, and political stability. Hopefully the talents of IT, network, and cloud services providers are put to their greatest test in modern times by facing “only” the global pandemic.
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